Middle East Rating and Investors Service (MERIS) has announced that it has downgraded the credit rating of Egypt-based steelmaker Ezz Steel to B+ from BB+, with the outlook being negative.
According to MERIS, Ezz Steel is facing critical external as well as internal challenges which heighten the risk profile of the company. So far, the company's operating performance has demonstrated an ability to withstand serious hurdles. Nevertheless, MERIS believes that the future outlook is questionable, which might impose extra pressure on the company's financial and operating performance, which is reflected in the negative rating outlook.
At the same time, the political issues and the negative perceptions around the chairman of the company are considered a key rating driver, as it might seriously impact overall performance. Nonetheless, so far, it has had no material impact on the company's business operation, according to MERIS' statement.
MERIS believes that the company's business profile will improve starting from 2015, following the completion of the currently ongoing vertical and horizontal expansion program. The new direct reduced iron (DRI) facility will sufficiently offset high raw material costs and mitigate the foreign currency risk, which will reflect positively on profitability margins.